Rents fall in three capital cities

Australia’s rate of rental growth is now at its lowest level since 2003, with three capital cities declining over the past year.

New figures from RP Data show that across Australia’s combined capital cities, rents are rising at a pace slower than inflation and recorded an annual growth rate of just 1.8 per cent.

RP Data research analyst Cameron Kusher said that with rental yields at such low levels, investors in the capitals will have to turn their attention to capital growth, rather than high-yielding investments.

According to Mr Kusher, the rate of rental growth is easing on the back of a large rise in capital city home values and a strong rise in the supply of new homes.

He said with more investors active in the market, rental yields were also being compressed.

“Slow rental growth rates have a knock-on effect for rental yields,” he said.

Mr Kusher said that with the rate of capital gains outpacing rental growth, rental yields have now fallen across all the capital cities.

A breakdown of the various capital cities can be seen below, courtesy of RP Data.

Rental declinesCanberraCanberra rental rates have fallen by -4.9 per cent over the past year while home values have increased by 0.9 per cent. Gross rental yields increased over the month of October and now sit at 4.2 per cent.

DarwinDarwin home values increased 5.0 per cent over the past year, but rents fell by -0.1 per cent. As a result, yields have been relatively steady at 5.9 per cent over recent months.

PerthPerth, TASPerth, WARental rates in Perth have fallen by -3.1 per cent over the past year while home values increased by 3.4 per cent. As a result, rental yields are recorded at 4.1 per cent – their lowest level since January 2012.

Rental increasesSydneySydney rental rates increased by 3.5 per cent over the past year while home values are up 13.1 per cent. Subsequently, yields are recorded at 3.7 per cent – the lowest reading since August 2005.

MelbourneMelbourne home values are 8.9 per cent higher over the year while rents have increased by a much lower 2.5 per cent. Gross rental yields are recorded at 3.3 per cent, which is the lowest gross yield across the capitals and equivalent to the lowest yield on record.

BrisbaneYields in Brisbane are at their lowest level since September 2011, with the city now attracting a gross yield of 4.5 per cent. Brisbane rents have increased by just 1.3 per cent over the past year compared to home value growth of 5.6 per cent.

AdelaideAdelaide home values have increased by 4.3 per cent over the past year while rental rates have increased by 1.5 per cent. Rental yields currently sit at 4.2 per cent – their lowest level since September 2012.

HobartHobart’s rental yields are at their highest level since November 2013 – now sitting at 5.4 per cent. Over the past year, Hobart rents have increased by 2.4 per cent and home values are 4.4 per cent higher.